Gavin Howe
If you're married, you can choose to file your taxes jointly or separately. While filing jointly is more common, there are some cases where filing separately can be beneficial. In the United States, common-law marriage has been practiced since the 1870s and is still recognized in certain states. If you meet your state's definition of a common-law couple, you can file taxes jointly and receive various benefits, such as tax deductions and social security benefits. However, it's important to note that the IRS only allows couples to file jointly if their state recognizes their relationship as a legal marriage. Therefore, it's essential to understand the specific requirements and benefits that apply to your situation before deciding how to file your taxes.
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What You'll Learn
Common-law marriage recognition by state
In the United States, common-law marriage, also known as sui juris marriage, informal marriage, marriage by habit and repute, or marriage in fact, is a form of irregular marriage that does not require a marriage license, ceremony, or certificate. It has been practiced since the 1870s and is still recognized in a few states.
As of 2022, common-law marriages are recognized in Colorado, Iowa, Kansas, Montana, Rhode Island, Oklahoma, Texas, and the District of Columbia. Utah and New Hampshire have limited recognition, and some states have abolished it but still recognize common-law marriages that began before a certain date or for specific purposes. For example, Alabama recognizes common-law marriages formed before January 1, 2017, and Florida recognizes those formed before January 1, 1968.
The recognition of common-law marriage varies by state, and each state has its own definition and requirements. In general, a common-law marriage is established when a couple lives together for a certain period and presents themselves as a married couple to their community, and fulfills other conditions, such as being of legal age and capable of giving consent.
When it comes to filing taxes, the IRS allows couples to file joint tax returns if their state recognizes their relationship as a legal marriage. Common-law partners can often save money by filing jointly and may be eligible for various tax deductions and benefits, such as social security and health insurance benefits. However, if recognized as a common-law marriage in one state and the couple moves to another state that does not recognize it, their relationship may still be acknowledged under the full faith and credit clause of the United States Constitution.
It is important to note that the information provided here may not be exhaustive, and the laws regarding common-law marriage can change over time. For specific legal advice, it is recommended to consult a local family law attorney or seek information from official government sources.
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Benefits of filing jointly
If you are recognised as common-law married, you must file your tax return jointly, or you could be held accountable for fraudulent tax returns. The Internal Revenue Service (IRS) treats common-law marriages as equal to legally married couples for tax purposes.
There are several benefits to filing jointly. Firstly, it can often save money, as a joint tax return often provides a bigger tax refund or lower tax liability. Secondly, filing jointly allows couples to use only one tax return, which is simpler and more convenient. Thirdly, filing jointly can be used as evidence of a common-law marriage, which may be beneficial in other areas such as employer benefits and health insurance. Lastly, filing jointly can provide access to various tax credits and deductions, such as a mortgage interest deduction if you own a property with your common-law spouse.
However, it is important to note that there may be instances in which filing separately may be more beneficial. For example, if one spouse has significant medical expenses to claim, it could be more advantageous to file separately.
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Filing jointly vs separately
In the United States, common-law marriage has been practised since the 1870s. Common-law partners can often save money by filing a joint tax return. However, the Internal Revenue Service (IRS) only allows couples to file joint tax returns if the state they live in recognises their relationship as a legal marriage.
When filing jointly, couples combine their income, deductions, and credits on one tax return with the same tax rate. Both partners are then responsible for any taxes, interest, or penalties due to the IRS. Filing jointly typically results in more tax benefits, such as a larger standard deduction, and a lower tax bill. For example, in 2024, the standard deduction for married couples filing separately was \$14,600, compared to \$29,200 for those filing jointly.
On the other hand, couples who file separately may get fewer tax benefits and a higher tax bill. However, there are certain circumstances where filing separately could be more beneficial. For example, if one partner has high medical expenses, filing separately may help surpass the threshold to deduct these costs. Similarly, if one partner is making student loan payments based on their income, filing separately may keep these payments lower. Additionally, if a couple is preparing for a divorce, filing separately can provide more financial separation.
Ultimately, each couple's situation is unique, and it is important to consider the pros and cons of each option to determine which filing status best matches their current situation and financial goals.
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Tax deductions for common-law couples
In Canada, common-law couples are treated the same as married couples for income tax purposes. However, unlike in the United States, Canadian tax rules require each individual to file their own tax return, regardless of their marital status. This means that common-law couples in Canada cannot file joint income tax returns. Despite this, there are still several tax deductions and credits that common-law couples can take advantage of.
Firstly, common-law couples can combine certain expenses and credits. For example, one partner can claim the total amount of combined charitable donations, which can lead to significant savings. Similarly, one partner can claim pooled medical expenses for themselves, their spouse, children under 18, and other dependents such as parents or grandparents. Additionally, if one spouse has eligible pension income and is the higher earner, the couple can benefit from splitting the pension income to reduce their overall tax liability.
Common-law couples can also transfer unused credits to one another. These include the tuition amount, age amount, disability amount, and pension income amount. Furthermore, if one spouse earns significantly more than the other, the higher-earning spouse can maximise deductions to reduce the amount of tax paid at a higher rate. For example, if one spouse spends money on childcare, they may be able to deduct these expenses from their income when filing their tax return.
It is important to note that the availability of certain deductions and credits may depend on the specific jurisdiction and its tax laws. Therefore, common-law couples should consult relevant tax authorities and professionals to understand the specific deductions and credits they may be eligible for.
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Common-law marriage and estate planning
Estate planning is a crucial aspect of financial management, especially for those in a common-law marriage. Common-law marriage, recognised in a handful of states, is established when a couple lives together and represents themselves as married without a formal ceremony, license, or registration. While it offers a more accessible path to legal marriage, it also presents unique challenges in estate planning, underscoring the importance of proactive measures to safeguard one's interests and protect loved ones.
The recognition of common-law marriages varies across states, and specific criteria must be met for a marriage to be legally recognised as common law. For instance, in Colorado, both parties must intend to be married, hold themselves out to the public as married, and live together continuously for a period. This recognition is essential as it impacts the couple's eligibility for spousal benefits and the estate planning process.
One of the primary challenges in estate planning for common-law marriages is the lack of clear and formal documentation. This can lead to disputes over inheritance, property rights, and financial assets upon the death of a partner. Surviving partners may find themselves in legal battles, uncertain of their rightful entitlements. Therefore, it is advisable for common-law couples to establish formal documents such as wills or trusts that explicitly outline their wishes regarding asset distribution upon their passing.
To navigate the complexities of estate planning in a common-law marriage, seeking legal counsel from experienced attorneys is highly recommended. They can provide tailored guidance, ensuring that formal documents are in place and up to date, reflecting the unique circumstances of the couple. By taking purposeful steps, common-law couples can mitigate potential conflicts and protect their interests and those of their loved ones.
Additionally, common-law couples should periodically review their estate plans and beneficiary designations to ensure they remain aligned with their wishes. This proactive approach empowers individuals in a common-law marriage to make informed decisions, safeguarding their rights and providing peace of mind for the future.
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Frequently asked questions
Yes, if your state recognizes your relationship as a legal common-law marriage, you can file a joint tax return. Common-law partners can often save money by filing a joint return and claiming various tax deductions.
A common-law marriage is a relationship where a couple lives together and presents themselves as a married couple to their community, without a formal wedding ceremony. Common-law marriage has been practiced in the United States since the 1800s and is still recognized in certain states.
Common-law marriages are recognized for federal income tax purposes if they are recognized by the state in which the couple resides. Currently, common-law marriage is recognized in the following states: Georgia, Idaho, New Hampshire (for inheritance only), and Ohio.
By filing jointly, common-law partners can take advantage of estate planning benefits, such as an unlimited marital exemption from estate planning. Additionally, they can receive one another's social security benefits and use employer benefits, such as health insurance coverage, for their spouses.
